ATLANTA, GA - The subprime mortgage crisis and subsequent global credit crunch have claimed another victim: the Atlanta condo. Local real estate developers say financial backing for condo projects has all but dried up. Those able to get financing are turning to high-end rental apartments instead. "Building condos right now is next to impossible; it really is," said Stephen Franco, a partner at Franco DeFoor Properties, an Atlanta real estate development company. "It's just financing. You can't get financing for condos."
High-end apartment complexes are in the works across the metro area, from trendy intown Atlanta neighborhoods to more suburban locales. Franco DeFoor is planning to build 250 to 300 upscale apartments on Memorial Drive in southeastern Atlanta's Reynoldstown neighborhood, not far from a cluster of condo complexes. "The new darling child of multifamily residential is rental," Franco said.
Atlanta's once high-flying condo market is reeling from an oversupply of units and a drop in demand as prospective buyers either can't get loans or are choosing to rent until the economy improves, real estate experts say. It's a dramatic about-face for Atlanta's housing industry, which became infatuated with condos earlier this decade. The building binge changed the city's skyline and introduced a generation of Atlantans to high-rise living.
The condo craze was fueled by the soaring popularity of intown living. Growing numbers of young professionals and empty-nesters sought a big-city lifestyle, where they could avoid lengthy commutes and walk to restaurants and shops. Lax lending standards, meanwhile, greatly increased the customer base. Although the Atlanta condo market never became as overheated as areas like Miami, a glut of units has forced prices down and left some buildings half-empty. And a number of condo projects begun during the boom are under construction and poised to come online, further saturating the market.
It all spells too much risk for banks and other lenders that have been badly burned during the real estate crisis. Apartments have historically been less of a gamble than condos, experts say. Atlanta-based Pollack Partners has completed the first phase of its first project, Two Blocks Apartment Homes, a $59 million, 400-unit luxury apartment complex in Dunwoody. The company also is planning a high-end apartment complex near Atlantic Station with up to 600 units.
The decline in new condo construction is a nationwide phenomenon. According to the National Multi-Housing Council, an industry trade group, condos accounted for 25 percent of new multifamily housing starts during the first quarter of this year, compared with more than 50 percent in 2006 at the height of the condo boom.
Many experts expect the trend to continue. "Apartments are a fabulous sector to be in right now," said Bill Donges, CEO of Atlanta-based Lane Co. and chairman-elect of the National Association of Home Builders Multifamily Council. "People are coming back to rent because less people are able to qualify" for home mortgages. In 2006, Lane's portfolio was split evenly between condos and apartments. Now, 95 percent of the company's units are rental apartments and 5 percent are condos. The company, which built apartments and condos at Atlantic Station, is now planning apartment complexes near City Hall East and in Atlanta's Grant Park neighborhood.
The abrupt change of fortunes in the condo market has claimed numerous victims in Atlanta. Prices of existing units have been slashed in attempts to drum up business. Several high-profile condo projects have been put on hold, including Cousins Properties' Fox Plaza in Midtown. The owners of Tribute Lofts on Freedom Parkway near downtown Atlanta plan to auction off 40 condo units this month. Residential development
Source: The Atlanta Journal-Constitution